April 24, 2014

Posts on social security

Subscribe to this feed Subscribe to this feed

 

Monday, February 24, 2014 - 3:52 PM

As we await the full release of the President’s Fiscal Year 2015 Budget, some important specifics have been slowly made public. It looks like this budget, as is usually the case, will contain a mixture of sensible reforms and politically expedient omissions.

The first bit of news is that this year’s budget will not contain a proposal -- included last year -- to switch the government-wide formula for measuring inflation to a more accurate index called the “Chained CPI.” 

Switching would save money in numerous spending programs, including Social Security, that provide cost-of-living increases. That’s because the government’s current formula, according to most economists, overstates inflation. The Chained CPI addresses this problem while ensuring that the value of federal benefits still keep up with citizens’ purchasing power.

Because tax brackets are indexed to inflation, switching to the Chained CPI would also increase revenue.

The President’s budget does not have the force of law and does not normally form the basis for the congressional budget resolution. It is a stylized world in which the administration proffers a multi-faceted policy course and projects where that would lead the nation fiscally.

In that world last year, the administration rightly identified that the country has a...

Monday, October 28, 2013 - 9:38 AM

Who says that Democrats and Republicans can't reach a grand bargain?

Harry Reid and Paul Ryan seem to have it figured out. If Democrats and Republicans don’t demand compromises from each other, everyone can get along. It’s the perfect political grand bargain: Do nothing.

Unfortunately, that could easily become a self-fulfilling prophecy.

The prospects for a real grand bargain – one that actually makes some headway on solving our fiscal imbalance – are not looking good right now. It is particularly disappointing, however, that already two key members of Congress are simply accepting the gridlocked status quo rather using their leading positions to figure out a better result.

In an interview with the Associated Press (AP), Ryan summed up his view this way: “If we focus on some big, grand bargain then we’re going to focus on our differences and both sides are going to require that the other side compromises some core principle and then we’ll get nothing done.”

That’s a bit like saying elected officials can’t do a grand bargain because it would require a grand...

Friday, August 30, 2013 - 12:55 PM

This year will mark the end of a four-year string of trillion-dollar-plus federal deficits that have troubled the American public and caused turmoil on Capitol Hill.

Fiscal Year 2013 is drawing to a close with a projected deficit of a little over $640 billion, down from $1.1 trillion last year. That’s good news, but it should hardly be considered an “all clear” signal on the nation’s fiscal and economic challenges.

Here are eight reasons why:

1. While the deficit is going down, the federal debt is still going up.

The government is still borrowing a substantial amount of money this year, and that is all being added to the accumulated debt, which is approaching  $17 trillion. That’s why elected officials -- despite their usual lamentations and finger-pointing -- have no choice but to raise the debt limit at some point in the next few months. The real question is what they will do to prevent the debt from growing in the future to unsustainable levels.

2. This year’s lower deficit can be largely attributed to short-term economic factors rather than systemic reforms in the federal budget

During difficult economic times with high unemployment, federal deficits rise as...

Tuesday, March 26, 2013 - 11:22 AM

Most plans to put the federal budget on a more sustainable path make a crucial assumption: That today’s younger workers will pay more of their own retirement costs than previous generations have.

By setting aside more money for retirement, the thinking goes, these younger workers can enable the federal government to reduce the high projected growth of Social Security and Medicare. They should theoretically be able to do this because they have more time to save large amounts of money and to let those savings compound.

As The Concord Coalition has often noted, however, Washington already favors older generations in many ways. And younger Americans face a number of financial hurdles and future challenges that must be kept in mind.

Many of them have been hit hard by the last recession, struggling with a poor job market and – thanks to skyrocketing tuition costs -- large amounts of student debt. With companies cutting back on retirement and health care programs, many younger people who have jobs  do not receive the compensation or employee benefits that their parents did.

The large and growing federal debt, meanwhile, means that younger Americans can expect higher taxes and less assistance from the federal government...

Tuesday, February 26, 2013 - 10:22 AM

In his State of the Union Address President Obama declared: “Our government shouldn’t make promises we cannot keep, but we must keep the promises we’ve already made.”

It was good applause line, but it glossed over a key point: The promises we’ve already made are the ones we cannot keep.

It is widely accepted that current fiscal policy is unsustainable. By definition, that means something has to change. Yet, if we decide that all promises must be kept, we can’t change anything without “breaking a promise.”

The dilemma for policymakers in Washington is that for years they have made unfunded promises and there is no politically convenient way to reverse this.

The first thing to do is just face up to it.

That’s why a bipartisan group of former members of Congress included this warning among their findings from their Strengthening of America forum series last fall: “We cannot put our debt on a sustainable path without reductions in the projected cost of entitlement programs, cuts in discretionary spending and higher revenues.”

Strictly speaking, any of those things could be characterized as breaking a promise.

It could be argued, for example, that...

Monday, April 16, 2012 - 3:01 PM

It’s getting to be that time again when the Social Security and Medicare Trustees release their annual report on the programs’ 75-year outlook. This report is the source of valuable information, but it often causes confusion because of the different conclusions that can be drawn depending upon whether one looks at trust fund balances, which are positive, or at cash flows, which are negative.
 
Is the glass half-full or half-empty?
 
The Concord Coalition has always stressed the importance of cash flows over trust fund balances. As the Congressional Budget Office (CBO) has observed, government trust funds “have important legal meaning but little economic or budgetary meaning.”1
 
This is because trust fund “assets” are nothing more than promises from the government to pay itself a lot of money in the future regardless of whether any resources have been saved for that purpose. Trust fund balances are thus easily manipulated to increase their claims on general revenues.
 
Two recent examples demonstrate why trust fund balances should be taken with a grain of salt. One involves a grant of spending authority (new bonds) to the Social Security trust funds unsupported by any new income. The other involves cutting spending from Medicare and raising Medicare payroll taxes to...

Monday, October 24, 2011 - 12:00 AM

Last week, AARP doubled-down on its insistence that Social Security and Medicare benefits should be off the table in negotiations to stabilize the nation’s debt. It did so in a letter to members of the deficit reduction “super committee” and in response to a Concord Coalition statement criticizing AARP’s new ad campaign, which warns that 50 million seniors will be heard from on election day if Congress even thinks about touching their benefits or asking them to pay more.
 
AARP’s further explanations are not encouraging. It continues to insist that Social Security poses little, if any, budgetary challenge because of an ample trust fund surplus and that cutting unspecified “waste” in Medicare can avoid hard choices on benefits and cost-sharing. AARP’s response to Concord’s statement:   
 

  • Does not acknowledge the magnitude of the fiscal challenge we are facing or the key role...
Tuesday, May 17, 2011 - 8:48 AM

Anyone wondering why Social Security and Medicare should be “on the table” in budget negotiations need look no further than the 2011 Trustees’ Report issued on May 13.

As is usually the case, media accounts of the trustees’ report tended to focus on trust fund balances rather than on the cash balances and growing costs of the two programs. Viewed from a trust fund perspective, the financial condition of Social Security and Medicare may appear troubling but of no immediate concern. Social Security’s combined trust funds are projected to remain solvent until 2036 and the Medicare HI trust fund [Part A] is solvent until 2024. The Medicare SMI trust funds [Parts B and D] are permanently solvent, but only because they have an automatic draw on general revenues.

So why worry about these programs now? Why not wait another 10 years before making changes in Medicare and 20 years or more for Social Security?

One reason is that both programs are straining the federal budget now because they are paying out more than they are taking in from dedicated resources, including payroll taxes, taxation of...

Monday, February 7, 2011 - 10:20 PM

A flurry of commentary greeted the unsurprising news last week that Social Security is paying out more than it is taking in. According to the Congressional Budget Office (CBO), the Social Security cash deficit for 2010 was $37 billion and will rise to $45 billion this year. The one-year payroll tax holiday enacted in December would actually leave the 2011 deficit much larger ($130 billion), but general revenues will be credited to Social Security to make up for the loss of payroll tax income.

Looking ahead, CBO now projects that Social Security will run perpetual cash deficits, amounting to $547 billion through 2021. By that year, CBO projects that Social Security outlays will exceed cash income by $118 billion.

Viewed as a percentage of the gross domestic product (GDP), Social Security’s cost will grow from 4.8 percent this year to 5.3 percent in 2021.

Running a cash deficit does not mean that full benefits cannot be paid. When there is a shortfall in cash income, Social Security can draw on its trust fund balance to continue issuing checks. Currently, the trust fund has a balance of $2.7 trillion and is projected to remain “solvent” until 2037. But this method of “financing” only serves to demonstrate why the government’s largest program will become a growing budgetary challenge.

The trust funds...

Monday, January 10, 2011 - 12:16 PM

Urban Institute scholar Gene Steuerle has run the numbers and found that for Medicare, retirees are getting a really good deal.

In a fascinating set of calculations, Steuerle and colleague Stephanie Rennane, looked at both Social Security and Medicare and estimated the levels of benefits relative to taxes (and premiums for Medicare) paid for many different levels of income and years of retirement.

For Social Security, prior generations received substantially more benefits than taxes paid, while current retirees and those in the future who earn average and above-average wages are scheduled to receive slightly less cash benefits than taxes paid. The lowest income workers are scheduled to still get more in benefits than taxes paid. 

For Medicare, however, their conclusion is that, "Past and current retirees, and most working age adults, will never pay for all of their benefits."

The basic reason is that Medicare payroll taxes, which only go towards Medicare Part A (hospital insurance), combined with premiums (which are set at levels to pay for about 25 percent of Medicare Part B costs), only cover 51 to 58 percent of total Medicare ...